Warburg Pincus to buy 20% in Airtel DTH: 7-point cheat sheet about the $350 million deal

Published On: 13, Dec 2017 | Source: financialexpress.com

Warburg Pincus, a United States-based private equity firm has entered into a deal with India’s largest telecom company Bharti Airtel on Tuesday. In 2005, Warburg Pincus completely exited from Bharti Airtel has returned to the company to buy a stake in its DTH (direct-to-home) arm Bharti Telemedia for an amount worth $350 million. Warburg Pincus was among the earliest investors in Bharti Airtel. Between the period of 1999 and 2001 Warburg Pincus had invested $292 million in Bharti Tele-Ventures (as the company was called then) for buying a 19% stake. We take a look at the $350 million deal between Bharti Airtel and Warburg Pincus in 7 points.

Warburg Pincus is a 51-year old US-based private equity firm having a presence in United States, Europe, Brazil, and two Asian nations — India and China. In a major development, Warburg Pincus has entered into an agreement on Tuesday to buy a 20% stake in Bharti Airtel DTH arm for an amount of $350 million.

Under the deal, Bharti Airtel will sell 15% stake in Bharti Telemedia, while the remaining 5% will be sold by another Bharti entity, Bharti Airtel said in a statement.

Once after the deal between Bharti Airtel and Warburg Pincus closes, Bharti Airtel will own 80% stake in the DTH unit and rest 20% would come under the control of Warburg Pincus.

Viraj Sawhney, managing director of Warburg Pincus India, will join Bharti Telemedia board as part of the deal.

Bharti Telemedia operates under the brand Airtel TV and has about 14 million subscribers and a revenue of about $550 million in the 12-month period ended 30 September.

“Airtel TV is very well positioned in the DTH space, and we are committed to grow our share of the market through a combination of innovation, value engineering, customer service and distribution initiatives,” Gopal Vittal, MD and CEO, India and South Asia, Bharti Airtel, said.

“The Indian digital TV market is expanding rapidly and we believe that Airtel DTH is well positioned to capitalise on incremental growth in digitisation and new TV penetration in Tier 3 and 4 towns and rural areas,” Vishal Mahadevia, MD and co-head, Warburg Pincus India, said.

Bharti Airtel-Warburg Pincus old affiliations

At the time when Warburg Pincus invested $292, Bharti was then valued at $1.5 billion. When Bharti went public in January 2002, Warburg’s stake came down to 15%.

Later in 2004-2005, Warburg sold 3.35% stake in the company for about $208 million. Bharti was then valued at $6.21 billion.

In March 2005, Warburg sold another 6% stake in Bharti for $560 million when the company was valued at $9.3 billion. The same year in October Warburg sold its final 5.65% stake to Vodafone for $847.5 million.

The company’s valuation at that time was $15 billion, which was 10 times when Warburg had invested five years ago, thus making Warburg’s total realisation at $1.6 billion, which was over 5.5 times its investment amount.